Judge dismisses MF Global employee termination lawsuit

The trustees overseeing the liquidation of MF Global have one less thing to worry about, after a judge dismissed a wrongful termination suit filed by a group of the bankrupt brokerage’s former employees.

The employees had argued that they were fired without warning after the company’s sudden October 2011 collapse. According to their suit, this violated the Worker Adjustment and Retraining Notification (WARN) Act, which requires companies to give employees 60 days’ advance written notice of mass layoffs.

James Giddens and Louis Freeh, the two trustees assigned to the case, maintained that the WARN Act did not apply in this case, as liquidating companies are not subject to the same rules as traditional employers. U.S. Bankruptcy Judge Martin Glenn agreed with the trustees, noting in his opinion that Giddens was appointed under the Securities Investors Protection Act (SIPA) and that “the only purpose of the SIPA proceeding is liquidation.”

Judge Glenn did leave the door open to further lawsuits, however. Although he dismissed the suit against MF Global Inc.—the company’s brokerage arm—with prejudice, Glenn gave the plaintiffs 30 days to amend and refile their complaint against parent company MF Global Holdings Ltd., which filed for bankruptcy protection under Chapter 11. According to Glenn, these bankruptcy cases, which are the purview of trustee Louis Freeh, “were filed at least initially with the hope of reorganization.”

MF Global collapsed last fall amid fears over its exposure to bad European debt. After the company declared bankruptcy, regulators discovered a shortfall of roughly $1.6 billion in customer-segregated funds.